NOMW Capital Basel III Pillar III disclosures III Report_ 2019.pdfNOMW Capital is a closed joint...

NOMW Capital

Basel III - Pillar III disclosures

As of December 31, 2019

Table of Contents

Section Description Page

1 Background 1

2 Executive Summary 7

3 Basel III Components 10

4 Risk and Capital Management Process 13

5 Regulatory Capital Requirements 15

6 Credit Risk 23

7 Market Risk 27

8 Operational Risk 28

9 Other Risks (Pillar II) 29

Pillar III – NOMW CAPITAL 2019

1

1. Background Capital Market Authority (CMA) issued its Prudential Rules in December 2012. As per the

Chapter 20 of the Prudential Rules, all Authorized Persons (APs) are required to have in

place an Internal Capital Adequacy Assessment Process (“ICAAP”).

As outlined in the CMA prudential rules, ICAAP requires five features including governing

body oversight, sound capital assessment, comprehensive assessment of risks, monitoring

and reporting and internal control review. Therefore, ICAAP not only ensures that

companies have adequate capital to support all the risks in their business, but also

encourages them to develop and use better risk management techniques by including

adequate Stress Testing scenarios in monitoring and managing their risks.

NOMW Capital (hereinafter referred to as “NOMW” or “the Company”), began operating in

2014, will provide its clients the following products:

• Real Estate Development Fund;

• Equity Arrangement: Venture Capital/Private Equity;

• Yielding Portfolio;

• Syndication/Sukuk Arrangement;

• Merger and Acquisition Services; and

• IPO Arrangement, Placement and Custody.

NOMW is licensed by CMA (license number 13172-37 dated November 26, 2013) to provide

wide number of financial services including dealing as principal, as underwriter, managing

investment fund, managing client portfolios, arranging and custody in the securities

businesses.

ICAAP at NOMW is comprehensive in its approach – its coverage includes all material risks,

corporate governance and internal control framework, capital planning and management

framework, strategic plans, and macro-economic factors. NOMW is in the process of

implementing robust policies and processes to measure, monitor, report all material risks

and adopt an efficient capital planning process to ensure that sufficient capital is available to

meet any unforeseen contingencies.

NOMW Capital Background

NOMW Capital is a closed joint stock investment company with commercial registration

number 1010404870, which is an authorized person under the Authorised Persons

Regulations, and regulated by the Saudi Capital Market Authority (CMA) with license

number 13172-37 dated November 26, 2013 to conduct securities business including,

dealing as principal, as underwriter, managing investment fund, managing client portfolios,

arranging and custody in the securities businesses.


2

The following depicts NOMW’s ownership structure:

✓ Al Tayar Investment and Real Estate Development Company – 25%

✓ Dr. Naser Al Tayar – 25%

✓ Dr. Ahmed Al Mohaymeed – 25%

✓ Dr. Nabih Al Jabr – 25%

NOMW’s current operational structure as at December 31, 2019 is as follows:

Summary of current and projected Financial and Capital Positions:

NOMW has projected its financial position based on its current position and expected

growth in the next three years. The expected growth is based on its strategic / business

direction of NOMW which it has documented in its business plan.


3

Current and Projected Financial Performance:

NOMW’s current financial results and projected financial performance are as follows. The

current financial results of 2018 and 2019 have been depicted along with the three years’

performance projection in the below table:

Particulars

2022 (Forecast)

2021 (Forecast)

2020 (Budget)

2019 (Actual)

2018 (Actual)

-------------------------------- SAR ------------------------------

INCOME STATEMENT

Income:

Arrangement Fee 13,500,000 12,500,000 10,301,771 2,904,000 2,929,137

Asset Management 22,900,000 20,500,000 19,621,682 17,095,615 16,153,614

Custody Fee 2,650,000 2,300,000 2,000,000 1,601,667 1,296,096

Structuring Fees - - - 173,250 200,000

Other Income 1,250,000 900,000 626,000 421,109 505,922

Fair value changes on FVTPL investments - - - (20,005) (166,076)

Total Income 40,300,000 36,200,000 32,549,453 22,175,636 20,918,693

Expenses:

Staff Cost 15,423,634 14,021,485 12,746,805 7,431,174 8,179,624

General and Administrative Costs 5,488,046 4,989,133 4,535,575 2,752,584 1,780,442

Rent 960,624 800,520 667,100 298,400 298,400

Depreciation 757,205 688,368 625,789 52,673 63,601

Zakat 2,446,625 2,127,500 1,850,000 1,456,244 1,355,947

Total Expenses 25,076,134 22,627,006 20,425,269 11,991,075 11,678,014

Net Operating Income 15,223,866 13,572,994 12,124,184 10,184,561 9,240,679


4

The projections of NOMW are a depiction of growth in NOMW’s size and operations. As

depicted in the table above NOMW has plans to grow by launching new products which will

substantially enhance its income from different business departments. However, there would

be an increase in personnel costs, rent, and other related expenses. In a nutshell, NOMW’s

Net Profits will increase on average by 14% based on the next 3 years’ projection.

Particulars

2022 (Forecast)

2021 (Forecast)

2020 (Budget)

2019 (Actual)

2018 (Actual)

--------------------------------- SAR --------------------------------

BALANCE SHEET

Assets

Current Assets:

Cash and cash equivalents 6,134,229 4,950,577 5,122,385 21,551,601 3,226,976

Murabaha with banks 60,000,000 55,000,000 23,000,000 - 33,000,000

Investment in trading securities - - 236,298 236,298 256,304

Account receivables including related parties 20,000,000 15,000,000 40,636,478 34,615,499 17,839,811

Other current assets 2,500,000 2,000,000 575,684 541,787 929,082

Total Current Assets 88,634,229 76,950,577 69,570,845 56,945,185 55,252,173

Non-current Assets

Properties, plant and equipment 1,000,000 1,250,000 1,726,941 41,922 56,629

Available For Sale investments 20,000,000 15,000,000 8,572,397 8,572,397 8,857,984

Total non-current assets 21,000,000 16,250,000 10,299,338 8,614,319 8,914,613

Total Assets 109,634,229 93,200,577 79,870,183 65,559,504 64,166,786

Liabilities and shareholders’ equity

Liabilities

Current Liabilities

Other current liabilities 6,149,225 5,493,500 6,239,791 4,511,197 4,298,330

Total current liabilities 6,149,225 5,493,500 6,239,791 4,511,197 4,298,330


5

Particulars

2022 (Forecast)

2021 (Forecast)

2020 (Budget)

2019 (Actual)

2018 (Actual)

--------------------------------- SAR --------------------------------

Non-current liabilities:

Indemnity 2,935,794 2,381,733 1,878,042 1,420,141 866,242

Total non-current liabilities 2,935,794 2,381,733 1,878,042 1,420,141 866,242

TOTAL LIABILITIES 9,085,019 7,875,233 8,117,833 5,931,338 5,164,572

SHAREHOLDERS' EQUITY

Capital 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000

Statutory reserve 6,921,757 5,399,371 4,042,071 2,829,653 1,811,197

Change in fair value of AFS Investments (4,585,505) (4,585,505) (4,585,505) (4,585,505) (4,299,918)

Retained earnings 48,108,523 34,407,043 22,191,349 11,279,583 11,113,478

Actuarial gain / (Loss) 104,435 104,435 104,435 104,435 377,457

TOTAL SHAREHOLDERS' EQUITY 100,549,210 85,325,344 71,752,350 59,628,166 59,002,214

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 109,634,229 93,200,577 79,870,183 65,559,504 64,166,786

Business Plan

NOMW plan is to focus on “start and quick win services and products” between 2019 and

2021, specifically real estate development fund, yielding fund, private equity fund, financial

advisory for SME and financing arrangements. Phase 2 of NOMW plan will extend from

2022 till 2024 and the focus will be on IPO arrangements, Sukuk, venture capital and

international fund. Third phase will be from 2025 and forward where NOMW will establish

financial alliance with respected financial institution in order to manage and provide equity

and fixed income instruments and will look for opportunities in the MENA market.

NOMW assumptions for 2020 are the following:

✓ Three (6) Arrangement Services transactions, to be distributed as follows:

- Two (3) Debt financing arrangement. Fees are SAR 9 million for debt financing to

be closed by Quarter 2 and Quarter 4.

- One (3) underwriting services with estimated service fees of SAR 1.5 million,

✓ Launching (2) new private equity fund; leading NOMW to manage four (6) funds.

The fund’s sizes will be as follows:

- Managed real estate funds SAR 921 million.

- Managed equity funds SAR 300 million.


6

NOMW’s plan is to increase its total assets up to SAR 44 million during the next 3 years. The

growth target for the next three years by NOMW is a Compounded Annual Growth Rate of

19%.

To achieve the above mentioned business objectives, NOMW has set the fol lowing key

targets for each of its lines of business based on which it has developed its financial

projections for the next three years:

The arrangement offered by NOMW to the clients will be through the following products:

Real estate Development Fund

A real estate development fund will be established to develop a single or multi projects and to

cater for the demand in this sector in the KSA market.

Equity Arrangement: Venture Capital/Private Equity

A company will be established between strategic investors, technical partner to play an active

role in the one of the most growing sector.

Yielding Portfolio

This portfolio will be established as a venue for investors which are looking to deploy their

liquidity in secured income yielding portfolio.

Syndication/Sukuk Arrangement

To arrange financing to corporate either through syndication or Sukuk or qusi equity

instrument.

Merger & Acquisition Services

To provide on merger and acquisition services.


7

2. Executive Summary The Capital Adequacy and Risk Management Report for NOMW CAPITAL “The Company”

has been prepared in accordance with the public / market disclosure requirements and

guidelines in respect of Pillar 3 of Basel III, as per the prudential rules published in December

2012 by Capital Market Authority “CMA” of the Kingdom of Saudi Arabia.

The purpose of this disclosure is to inform market participants of the key components, scope

and effectiveness of NOMW’s risk management systems, risk measurement processes, risk

profile and capital adequacy. This is accomplished by providing consistent and

understandable disclosure of NOMW’s risk profile in a manner that enhances comparability

with other institutions.

Pillar III is adopted by NOMW in 2014 for the first time.

NOMW has adopted the Standardized Approach for Credit Risk and highest of Basic

Indicator Approach and Expenditure approach for Operational Risk. These approaches have

been discussed in detail in the following pages of this report.

This Capital Adequacy and Risk Management Report provides details on NOMW’s risk

profile with business volumes by risk asset classes, which form the basis for the calculation

of our capital requirement.

In accordance with the minimum capital requirement calculation methodology as prescribed

under Basel III, NOMW capital adequacy as at 31st December is as follows:

31 December 2019

31 December 2018

Total Capital Adequacy Ratio (including Pillar II and stress tests impact)

1.61 3.30

Simulated total capital adequacy ratio for 2020-2022:

31 December 2020

31 December 2021

31 December 2022

Total Capital Adequacy Ratio (including Pillar II and stress tests impact)

2.06 3.25 3.12

Based on the above, it’s clear that NOMW Capital would be sufficiently capitalized and

would not need to raise capital from future sources in case a plausible stress event is to

transpire.

As of 31st December 2019 total Risk Weighted Assets (RWA) amounted to SAR 28.5 M

which comprised of 89.3% Credit Risk, 0.2% market risk and 10.5% Operational Risk.


8

Capital adequacy assessment details as of 31st December 2019 are shown as below table:

CAPITAL ADEQUACY ASSESSMENT SUMMARY – 31st December 2019

Particulars

Regulatory Capital – Pillar I

Risk Capital – (Pillar I + Pillar II)

---------------- SAR (‘000) --------------

Credit Risk 25,453 25,453

Market Risk 42 42

Operational Risk 2,998 2,998

Pillar I Total 28,493 28,493

Reputation Risk 285

Business/Strategic Risk 107

Concentration Risk 142

Pillar II Total 29,027

Additional capital to cover stress testing 1,826

ICAAP Capital Requirement 28,493 30,853

Additional Capital Requirement - 2,360

Capital Base 59,628 49,653

Surplus (Deficit) in Capital Base 31,135 18,800

Capital Ratio 2.09 1.61

N.B: it is worth to be noted that all figures and amounts being reflected in this report are in

Saudi Riyals.

Simulated capital adequacy assessment as of 31 December 2020-2022:


Particulars



---------------- SAR (‘000) --------------


Market Risk 43 43



Reputation Risk 273




Additional capital to cover stress testing 755


Additional Capital Requirement 1,267





9


Particulars



---------------- SAR (‘000) --------------




Reputation Risk 210











Particulars



---------------- SAR (‘000) --------------




Reputation Risk 261










Based on the above, it is clear that NOMW Capital would be sufficiently capitalized and

would not need to raise capital from future sources in case a plausible stress event is to

transpire.


10

3. Basel III Components In December 2012, CMA issued a circular requiring financial institutions operating in the

Kingdom of Saudi Arabia to report their capital adequacy requirements according to the

Basel III guidelines. Basel III is an international initiative (adopted by CMA) with a view to

ensure adequate capitalization of financial institutions on a more robust risk-sensitive basis

providing a framework for assessment of risk and calculation of regulatory capital

requirement, i.e. the minimum capital that an institution must hold, given its risk profile.

Basel III framework is intended to strengthen risk management practices and processes

within financial institutions.

CMA’s Basel II / III framework describes the following three pillars which are designed to be

mutually re-enforcing and are meant to ensure an adequate capital base which corresponds

to the overall risk profile of the financial institution:

✓ Pillar 1: Calculation of capital adequacy ratio based on charge for credit, market and

operational risks stemming from business operations.

✓ Pillar 2: Supervisory review process which includes:

• Internal Capital Adequacy Assessment Process (ICAAP) to assess

incremental risk types not covered under Pillar 1;

• Quantification of capital required for these identified risks; and

• The assurance that the Company has sufficient capital cushion (generated

from internal / external sources) to cover these risks over and above the

regulatory requirement under Pillar 1.

✓ Pillar 3: Market discipline through public disclosures that are designed to provide

transparent information on capital structure, risk exposures, risk mitigation and the

risk assessment process.

These concepts are further described in the following pages.

This report represents the Company’s market disclosures, under the Pillar 3 requirements,

of its risk profile and capital adequacy as at the end of 31st December 2019.

3.1. Pillar I – Minimum Capital Requirements

Basel II / III, as adopted and implemented by CMA, cover the minimum regulatory capital

requirement for financial institutions for credit, market and operational risks s temming from

its business operations. It also sets out the basis for consolidation of entities for capital

adequacy reporting requirements, the definition and calculations of Risk Weighted Assets

(RWA) and the various options given to financial institutions to calculate these Risk

Weighted Assets.

The regulatory capital requirements are calculated according to the following formula

(expressed as a percentage):

Minimum Capital Requirements = Capital Base

RWA

The Minimum Capital Requirements is to be greater or equal to 14%.

The table below describes the approaches available for calculating the RWA for each of the

aforementioned risk types:


11

Credit Risk Market Risk Operational Risk

Standardized Approach Standardized Approach Highest of Basic Indicator approach and Expenditure based approach

a) Credit Risk

The Company uses the Standardized Approach at the consolidated level for regulatory

reporting purposes. This approach differs from the Basel I regulations in that it allows the

use of external ratings, where available, from accredited ratings agencies for the

determination of appropriate risk weights, and also includes a wider range of eligible

financial collaterals.

b) Market Risk

The Company uses the Standardized Approach at the consolidated level for regulatory

reporting purposes.

c) Operational Risk

The Company uses the higher of Basic Indicator Approach and Expenditure Based

Approach.

Basic Indicator Approach related capital charge is the average of the last 3 gross operating

Income multiplied by 15%.

Expenditure Based Approach related capital charge is the total expenditure multiplied

by 25%.

3.2. Pillar II – Supervisory Review Process

The Supervisory Review Process (SRP) under Pillar II requires financial institutions to

employ an Internal Capital Adequacy Assessment Process (ICAAP) aimed at:

a) Quantifying the Company’s own internal assessment of the level of capital that it deems

appropriate to adequately cover all material risks that it is exposed to; and

b) Instituting a comprehensive process for business and capital planning to ensure that

adequate capital is always available to cover its risk exposures. Companies are also

required to identify sources for raising additional capital in case of need and to provide

documented plans thereof. As part of this process financial institutions are required to

ascertain whether credit, market and operational risk capital charges calculated under Pillar

I are adequate to cover Companies’ internal assessment of these risks or not. Furthermore,

they are expected to ascertain additional capital requirements (over and above the Pillar I

requirements) for the Pillar II risks that Companies are exposed to (examples of some risks

are reputation risk, business strategic risk). The ICAAP has to be designed to ensure that

companies have sufficient capital cushion to meet regulatory and internal capital

requirements during periods of systemic / cyclical economic downturns or during times of

financial distress - which involves employing stress testing and scenario analysis

techniques.

In compliance with the regulatory requirements, NOMW has submitted its detailed ICAAP

Plan for the year 2019.


12

3.3. Pillar III – Market Discipline

Under Pillar 3, CMA prescribes the qualitative and quantitative disclosures which are

required to be made to external stakeholders of the Company. The disclosures are designed

to enable stakeholders and market participants to assess an institution’s risk appetite, risk

exposures and risk profile. It encourages the move towards more advanced forms of risk

management.


13

4. Risk and Capital Management Process

NOMW is exposed to a broad range of risks in the normal course of its business. The

Company’s risk and capital assessment policies are designed to identify and quantify these

risks, set appropriate limits in line with defined risk appetite, ensuring control and monitoring

adherence to the limits. The principal risks associated with the Company’s business are

reputation risk and business strategic risk.

Executive Committee

The Executive Committee shall assist the Board in carrying out its investment and

management responsibilities, which include the following:

✓ Define the operational financing for the current investments to certain limits on behalf of

the board of directors

✓ Approving new deals or additional financing for the current investments to certain limits on

behalf of the BOD

✓ Monitoring the performance of the company’s management portfolio

✓ Approving the capital structure, full or partial liquidation of investments and approval on

recommending (subject to the agreement of the BOD) on annual financial statements,

annual budget and assigning external auditors

✓ Approving and recommending policies and procedures, organizational structure and

others.

Audit Committee

The audit committee duties and responsibilities are as per the following:

✓ Acting as an independent body to monitor the financial reporting system and the

Company’s internal control procedures

✓ Reviewing and evaluating the work of the internal and external auditors, and providing a

channel of communication between them and senior management and BOD

Compliance Committee

The Compliance committee shall assist the BOD and the Company’s management team to

oversee the following:

✓ Compliance program to ensure compliance with laws, rules and regulations specially the

rules issued by the Capital Market Authority

✓ Compliance with internal policies and procedures

✓ Guides of the corporate governance and others.

Nomination and remuneration Committee

The nomination and remuneration committee is responsible for assisting the BOD on the

selection of staff and determine their remuneration, development, and promotions. It is also

responsible for adopting of succession plan to ensure the Company’s business continuity.


14

BOD

NOMW Capital’s BOD is responsible for overseeing the Company’s business, the

development of its policies and objectives, identifying the main risks involved in the

Company’s investments and implementing effective systems to monitor and manage these

risk efficiently, protecting its assets and shareholder’s equity, developing and implementing

succession policies for senior management team to ensure the business continuity,

supervising the implementation of internal policies, provide leadership and direction for the

Company with commitment to the highest ethical standards and integrity, and ensure

compliance with all regulatory and legal requirements in force.

Internal Audit

The Company has assigned third party to provide internal audit function for the Company

since December 2015.


15

5. Regulatory Capital Requirements This chapter describes NOMW’s capital requirements, calculated on the basis of regulatory

guidelines. The risk types under Pillar I are in accordance with Basel II / III guidelines issued

by CMA and contain credit, market and operational risks.

As at 31st December 2019 the Company’s overall regulatory capital requirements under

Pillar I can be broken down as follows.

Risk Type Capital Requirement

SAR (‘000) % of Total Requirement

Credit Risk 25,453 89.3 %

Market Risk 42 0.2 %

Operational Risk 2,998 10.5 %

Total 28,493 100.0 %

Simulated Company’s overall regulatory capital requirements under Pillar I for 2020-2022

are as follows:

Risk Type Capital Requirement

SAR (‘000) % of Total Requirement

2020

Credit Risk 22,168 81.2%

Market Risk 43 0.2%

Operational Risk 5,106 18.6%

Total 27,317 100.0 %

2021


Market Risk - -


Total 21,046 100.0 %

2022


Market Risk - -


Total 26,136 100.0 %


16

5.1. Capital Requirement for Credit Risk

NOMW calculates the capital requirements for credit risk according to the Standardized

Approach. Under this approach, exposures are assigned to portfolio segments based on the

type of counterparty and/or the nature of the underlying exposure.

The major portfolio segments as defined by the Basel guidelines adopted by CMA where

each segment has a defined risk weight ranging from 0% to 714% depending on tenor, type

of exposure, asset class, whether the counterparty has an external rating and whether the

exposure is past due.

The following table describes the amount of exposures subject to credit risk and the related

capital requirements, by portfolio.

2019

Asset Class Exposure

SAR (’000)

Risk

Weights

Effective RWA

SAR (‘000)

Capital

Requirement

SAR (‘000)

Exposure to Banks 21,547 20% 4,309 603

Exposure to APs 718 150% 1,077 151

Exposure to Corporates 110 714% 787 110

Tangible assets 42 300%

127,728 17,882

deferred expenditure /

accrued income 374 300%

Retail exposures 90 300%

Holdings in listed shares or

equivalent 1,212 150%

Closed-ended Investment

Fund 41,064 300%

Open-ended Investment

Fund - 150%

Cash or Gold 5 0%

Unlisted equity - 400%

Other on balance sheet

exposures - Other items 168 714%

Prohibited exposure 47,906 6,707

Total 181,807 25,453

Simulated exposures for 2020-2022 subject to credit risk and the related capital

requirements are described in the following tables:


17

2020

Asset Class Exposure Risk Weights Effective RWA

Capital

Requirement

SAR (‘000) SAR (‘000) SAR (‘000)

Exposure to Banks 28,122 20% 5,624 787

Exposure to APs - 150% - -

Exposure to Corporates - 714% - -

Tangible assets 1,727 300% 5,181 725

Deferred expenditure / accrued income 576 300% 1,728 242

Holdings in listed shares or equivalent

1,212 150% 1,819 255

Closed-ended Investment Fund

47,997 300% 143,990 20,159

Open-ended Investment Fund

- 150% - -

Unlisted equity - 400% - -

Cash or Gold - 0% - -

Other on balance sheet exposures - Other items

- 714% - -

Total 79,634 158,342 22,168


18

2021


Capital

Requirement

SAR (‘000) SAR (‘000) SAR (‘000)

Exposure to Banks 59,951 20% 11,990 1,679



Tangible assets 1,250 300% 3,750 525

Deferred expenditure / accrued income

2,000 300% 6,000 840


1,212 150% 1,819 255

Closed-ended Investment Fund

28,788 300% 86,363 12,090

Open-ended Investment Fund

- 150% - -




- 714% - -

Total 93,201 109,922 15,389


19

2022


Capital

Requirement

SAR (‘000) SAR (‘000) SAR (‘000)

Exposure to Banks 66,134 20% 13,227 1,852



Tangible assets 1,000 300% 3,000 420

Deferred expenditure /

accrued income 2,500 300% 7,500 1,050

Holdings in listed shares

or equivalent 1,212 150% 1,819 255

Closed-ended Investment

Fund 38,788 300% 116,363 16,290

Open-ended Investment

Fund - 150% - -



Other on balance sheet

exposures - Other items - 714% - -

Total 109,634 141,909 19,867

5.2. Capital Requirements for Market Risk

NOMW currently (or in the future) is not subject to material Market risk, and the source of the

market risk as of the end of year 2019.

5.3. Capital Requirements for Operational Risk

The Company uses the higher of Basic Indicator Approach and Expenditure Based Approach.

Basic Indicator Approach related capital charge is the average of the last 3 gross operating

Income multiplied by 15 %.

Expenditure Based Approach related capital charge is the total expenditure multiplied by

25 %.


20

The capital charge requirements for operational risk are detailed in the table below.

Basic Indicator Approach

----------------------------------------------------- SAR (‘000) ----------------------------------------------------

Gross Operating Income Average Gross

Operating

Income

Risk Capital

Charge

Capital

Requirement 2017 2018 2019

10,107 20,919 22,176 17,734 15% 2,660

Expenditure Based Approach

----------------------------------------------------- SAR (‘000) ----------------------------------------------------

Overhead expenses (2019) Risk Capital Charge Capital Requirements

11,991 25% 2,998

Maximum of Basic Indicator Approach and Expenditure

Approach 2,998

The simulated capital charge requirements for 2020-2022 for operational risk are detailed in

the below tables:

2020


----------------------------------------------------- SAR (‘000) ----------------------------------------------------


Operating

Income

Risk Capital

Charge

Capital


20,919 22,176 32,549 25,215 15% 3,782


----------------------------------------------------- SAR (‘000) ----------------------------------------------------


20,425 25% 5,106


Approach 5,106


21

2021


----------------------------------------------------- SAR (‘000) ----------------------------------------------------


Operating

Income

Risk Capital

Charge

Capital


22,176 32,549 36,200 30,308 15% 4,546


----------------------------------------------------- SAR (‘000) ----------------------------------------------------


22,627 25% 5,657


Approach 5,657

2022


----------------------------------------------------- SAR (‘000) ----------------------------------------------------


Operating

Income

Risk Capital

Charge

Capital


32,549 36,200 40,300 36,350 15% 5,452


----------------------------------------------------- SAR (‘000) ----------------------------------------------------


25,076 25% 6,269


Approach 6,269


22

5.4. Capital Structure

The total eligible capital (Tier I and II) calculated in accordance with CMA guidelines is as

follows.

Name of authorised person: NOMW Capital

Reporting date: Dec 2019 Dec 2018

CAPITAL BASE SAR '000 SAR '000

Tier-1 Capital

Paid-up capital 50,000 50,000

Share premium 0 0

Reserves 2,934 1,811

Audited retained earnings 0 0

Verified previous year profit/(loss) 1,095 1,873

Verified interim profit/(loss) 10,185 9,241

Loss offsetting against capital reduction 0 0

Tier-1 adjustment *

Unverified interim loss (-) 0 0

Unverified previous year loss (-) 0 0

Goodwill and intangible assets (-) 0 0

Unrealised losses from HFT investments (-) 0 (166)

Unrealised losses from AFS investments (-) (4,586) (4,300)

Deferred zakah assets (-) 0 0

Dividend expense from retained earnings (-) 0 0

Zakah expense from retained earning (-) 0 0

Other negative equity items (-) 0 0

Other deductions from Tier-1 (-)

Deductions (-) (4,586) (4,466)

Tier-1 capital 59,628 58,459

Tier-2 Capital

Subordinated loans 0 0

Tier 2 debt securities 0 0

Cumulative preference shares 0 0

Revaluation reserves 0 0

Tier-2 adjustment *

Other deductions from Tier-2 (-)

Deduction to meet Tier-2 capital limit (-) 0 0

Tier-2 capital 0 0

CAPITAL BASE 59,628 58,459


23

6. Credit Risk 6.1. Credit Exposure

6.1.1. Asset Classes


Capital

Requirement Credit Rating

SAR (‘000) SAR (‘000) SAR (‘000) SAR (‘000)

Exposure to Banks 21,547 20% 4,309 603 *

Exposure to APs 718 150% 1,077 151

Unrated

Exposure to Corporates 110 714% 787 110

Tangible assets 42 300%

127,728 17,882

deferred expenditure / accrued

income 374 300%

Retail exposures 90 300%

Holdings in listed shares or

equivalent 1,212 150%

Closed-ended Investment Fund 41,064 300%

Open-ended Investment Fund - 150%

Cash or Gold 5 0%

Other on balance sheet exposures

- Other items 168 714%

Prohibited exposure 47,906 6,707

Total 181,807 25,453

* Details of APs and Banks’ related credit ratings are described in the following table.


24

Bank Exposure Risk Weights Effective RWA

Capital

Requirement Credit Rating Credit Agency

SAR (‘000) SAR (‘000) SAR (‘000)

Bank Albilad 566 20% 113 16 A3 Moody's

Albilad Capital 390 20% 78 11 A3 Moody's

National Commercial

Bank 100 20% 20 3 A- Fitch

Arab National Bank 3,000 20% 600 84 BBB+ Fitch

Alinma Bank 17,491 20% 3,498 489 A- Fitch

Exposure to APs and

Banks 21,547 20% 4,309 603


25

6.1.2. Allocation of on-balance sheet exposures to risk weight buckets

An analysis of the portfolio by the regulatory risk weight buckets is presented in the table below:

Portfolio Risk Buckets

Total 0 % 20 % 150 % 300 % 714 %

Exposure to APs and Banks - 21,547 718 - - 22,265

Exposure to Corporates - - - - 110 110

Tangible assets - - - 42 - 42

Deferred expenditure / accrued income

- - - 374 - 374

Retail exposures - - - 90 - 90


- - 1.212 - - 1,212

Closed-ended Investment Fund - - - 41,064 - 41,064

Open-ended Investment Fund - - - - - -

Cash or Gold 5 - - - - 5

Unlisted equity - - - - - -


- - - - 168 168

Off Balance Sheet - - - - - -

Total 5 21,547 1,930 41,570 278 65,330

Total Related Capital Charge - 4,309 2,895 124,710 1,985 133,899


26

6.2. Receivables’ Ageing

Receivables 0-90 days More than 90

days

Total as of 31

December 2019

Exposures related to Corporates - 110 110

Retail - 90 90

Investment Funds

(Closed ended) 9,522 24,175 33,697

Other receivables 718 - 718

Total 10,240 24,376 34,615


27

7. Market Risk Market risk is the risk that the value of a portfolio, either an investment portfolio or a trading

portfolio, will decrease due to the change in value of the market risk factors. The standard market

risk factors are stock prices, interest rates and foreign exchange rates. The associated market

risks are:

✓ Equity risk, the risk that stock prices and/or the implied volatility will change.

✓ Interest rate risk, the risk that interest rates and/or the implied volatility will change.

✓ Currency risk, the risk that foreign exchange rates and/or the implied volatility will change.

NOMW currently (or in the future) is not subject to material Market risk .

Measurement

NOMW has used the approach stipulated in CMA Prudential Rules for its market risk

assessment to arrive at the Risk Weighted Assets (RWA) for its market risk.

2019

Risk Net Long

Position

Net Short

Position

Capital

Requirement

Equity Price Risks 229 - 41

Investment Fund Risks 7 - 1

Interest Rate Risks - Debt Securities - - -

Interest Rate Risks - Securitisation - - -

Interest Rate Risks - Resecuritisation - - -

Foreign Exchange Rate Risks - - -

Commodities Risks - - -

Settlement Risks - - -

Total

42


28

8. Operational Risk It is a risk of monetary losses resulting from inadequate or failed internal processes, people, and

systems or from external events. It includes legal risk, but excludes strategic and reputational risks.

Legal risk includes, but is not limited to, exposure to f ines, penalties, or punitive damages resulting

from supervisory actions, as well as private settlements. It arises out of the legal implications of

failed systems, people, processes or external events.

Information Technology Risk, an integral part of Operational Risk arises out of failure in systems or

non-adherence to laid-down processes or misuse by staff apart from external events.

Measurement

The Operational Risk Capital Charge for NOMW is calculated as higher of the Basic Indicator

Approach (BIA) and Expenditure Based Approach under Pillar I as stipulated by CMA’s prudential

rules.

2019


----------------------------------------------------- SAR (‘000) ----------------------------------------------------


Operating

Income

Risk Capital

Charge

Capital


10,107 20,919 22,176 17,734 15% 2,660


----------------------------------------------------- SAR (‘000) ----------------------------------------------------


11,991 25% 2,998


Approach 2,998

The capital charge for operational risk is the higher of the two above approaches of which is the

Basic Indicator one amounting to 3.0m.

It is worth to be noted that although the standardized approach is one of the methods to be

considered for operational risk as per Basel requirements, the Company has not taken it into

consideration as the related capital adequacy of this excel sheet is disabled.


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9. Other Risks (Pillar II)

Pillar II objectives are to cover risks not covered under Pillar I (which will be illustrated in details in

this section) along with additional capital charge resulting from stress tests.

9.1. Interest Rate Risk on Banking Book

Interest Rate Risk in Banking Book (IRRBB) refers to the risk of loss in earnings or economic value

of the company’s Banking Book because of movement in interest rates.

Measurement

NOMW currently (or in the future) is not subject to material interest rate risk in the banking book,

hence this category has not been considered for quantification purposes

9.2. Liquidity risk

Liquidity risk is defined as the company’s inability to meet its obligations. The analysis of liquidity

risk requires to measure the liquidity position of the company and to examine how funding

sources are likely to evolve under various scenarios. Liquidity risk usually arises from short term

liabilities that have a short contractual maturity such as non-interest bearing accounts and are

generally dealt by keeping a cash buffer to serve the liquidity needs.

Measurement

Liquidity Risk has been incorporated based on analysis of NOMW’s ability to meet its liabilities

when due. However currently NOMW Capital does not have material liabilities (or in the future) and

as such currently these are considered negligible.

9.3. Reputation risk

Reputation risk is the current and prospective impact on earnings and capital arising from negative

public opinion. This may arise from market rumors, severe regulatory sanctions, or heavy financial

losses. Such negative publicity, whether true or not, may impair public confidence, result in costly

litigation, or lead to a decline in its client base/ business.

NOMW operations began in June 2014 and have not faced any adverse publicity, investor run or

regulatory penalties since then. As an employer, the company’s remuneration is in line with the

industry. The policies for various risks are well documented and are reviewed regularly. Risk and

Compliance function at NOMW ensures that business is conducted within the applicable legal and

regulatory framework. The HR function focuses on developing ethical and moral values in the

employees.

Measurement

The factors that primarily have an impact on the reputation of NOMW have been identified based

on which a scorecard based methodology has been adopted. These factors are outlined in the table

below:


30

# Risk Drivers

1 Loss Event Identification

2 Peer Group Comparison

3 Information Reporting Accuracy

4 Staff Competence and Support

5 Corporate Culture

6 Risk Management & Control Environment

7 Financial Soundness

8 Business Practices

9 Customer Satisfaction

10 Legal and Compliance Risk

11 Contagion Risk

12 Crisis Management

13 Transparency & Accountability

The scorecard is administered by the Senior Management for measuring the impact of the above

mentioned factors on the company’s reputation. A risk mapping table has been developed and

adopted by NOMW to link the score to the amount of capital that needs to be kept aside.

The scores obtained from the scorecard are then calculated based on weight given to responses

within each area and aggregated to arrive at a final score for Reputational Risk. The score obtained

for Reputational Risk assessment is 91.0 out of 100. This score is then calibrated with Pillar I

capital charge as mentioned below:

Score Grade Min Max Applicable Capital

charge

75-100 75 100 1.00%

50-74 50 75 2.00%

25-49 25 50 4.00%

0-24 0 25 8.00%

Reputation Risk Score 91.0

Applicable % of Reputation Risk 1%

Pillar I Capital Charge (‘000) SAR 28,493

Reputation Risk Capital Charge (‘000) SAR 284.93


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So the reputation Capital charge is 284.93 thousand.

Simulated Reputation Risk Capital Charge from 2020 to 2022:

Reputation risk Capital Charge projections till the year 2022 are given below:

Score Grade 2020 2021 2022

Pillar I Capital Charge SAR (‘000) 27,317 21,046 26,136

Applicable Capital Charge for Reputation Risk 1.00% 1.00% 1.00%

Capital required for Reputation Risk SAR (‘000) 273.17 210.46 261.36

9.4. Business / Strategic risk

Business / Strategic risk refers to the current and prospective impact on earnings or capital arising

from adverse business decisions, improper implementation of decisions, or lack of responsiveness

to industry changes. It arises from formulation and implementation of strategic plan, business plan,

which is inappropriate and inconsistent with internal factors and external environment that may

affect earnings, capital fund or viability of the business.

NOMW has defined vision and mission statements which are in line with its business objectives. i.e.

as follows:

Vision:

To be one of the top leading investment house in the MENA region.

Mission:

To be one the preferred investment house by maintaining the following:

✓ High management standards;

✓ High quality standards;

✓ Fulfill our commitments to deliver projects on time;

✓ Sourcing unique investment opportunities;

✓ Advising client in professional manner; and

✓ Deliver the targeted return.

To be a trusted financial House by maintaining the followings:

✓ Dealing with client in well transparent manner;

✓ Deliver right advice in right place; and

✓ Deliver service in mount of truth.

Measurement

The factors that primarily have an impact on the strategies / business of NOMW have been

identified based on which a scorecard based methodology has been adopted. These factors are

outlined in the table below:


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# Risk Drivers

1 Formulation of Overall Business and Corporate Objectives

2 Business Environment Scan

3 Economic Environment Scan

4 Investor Profiling

5 Real Estate Profiling

6 Business Planning

7 Staff Management - Strategic implementation plans

8 Technology Management - Strategic / Business implementation plans

A scorecard is used which attempts to rate the efficacy of each of the above defined areas to

evaluate the effectiveness. Each of the areas is assigned weightage to arrive at a final score.

The scores obtained from the scorecard are then calculated based on weights given to response

within each area and are aggregated to arrive at a final score for Business / Strategic Risk. The

score obtained for Business / Strategic Risk assessment is 91.25 out of 100. This score is then

calibrated with Pillar I capital charge as mentioned below:

Score Grade Min Max Applicable Capital

charge

75-100 75 100 0.375%

50-74 50 75 0.75%

25-49 25 50 1.50%

0-24 0 25 3.00%

The score of 91.25 calibrates to 0.375% of Pillar I Charge.

Business / Strategic Risk Score 91.25

Applicable % for Business / Strategic Risk 0.375%

Pillar I Capital Charge 28,493

Business / Strategic Risk Capital Charge 106.85

The Business / Strategic Risk Capital Charge come out to be SAR 106.85 thousand.

Simulated Strategic Risk Capital Charge from 2020 to 2022:

Strategic risk Capital Charge projections till the year 2022 are given below:


33

Score Grade 2020 2021 2022

Pillar I Capital Charge (‘000) 27,317 21,046 26,136

Applicable Capital Charge for Strategic Risk 0.375% 0.375% 0.375%

Capital required for Strategic Risk (‘000) 102.44 78.92 98.01

9.5. Concentration Risk

Concentration risk can be defined as any single (direct and/or indirect) exposure or group of

exposures with the potential to produce losses large enough to threaten an institution’s health or its

ability to maintain its core business.

Measurement

The factors that primarily have an impact on the concentration of the assets of NOMW have been

identified based on which a scorecard based methodology has been adopted. These factors are

outlined in the table below:

# Risk Drivers

1 Liquidity of the asset/investment

2 build-in risk

3 Authorities and regulators monitor

4 Collaterals

The scorecard is administered by the Senior Management for measuring the impact of the above

mentioned factors on the company’s assets concentration. A risk mapping table has been

developed and adopted by NOMW to link the score to the amount of capital that needs to be kept

aside.

The scores obtained from the scorecard are then calculated based on weight given to responses

within each area and aggregated to arrive at a final score for Concentration Risk. The score

obtained for Concentration Risk assessment is 77.51 out of 100. This score is then calibrated with

Pillar I capital charge as mentioned below:

Score grade Min Max Applicable Capital Charge %

75-100 75 100 0.50%

50-74 50 75 1.00%

25-49 25 50 2.00%

0-24 0 25 4.00%


34

The score of 77.51 calibrates to 0.50% of Pillar I Charge.

Concentration Risk Score 77.51

Applicable % of Concentration Risk 0.50%

Pillar I Capital Charge SAR (‘000) SAR 28,493

Concentration Risk Capital Charge SAR (‘000) SAR 142.47

The Concentration Risk Capital Charge comes out to be SAR 142.47 thousand.

Simulated Concentration Risk Capital Charge from 2020 to 2022:

Concentration risk Capital Charge projections till the year 2022 are given below

2020 2021 2022

Pillar I Capital Charge SAR (‘000) 27,317 21,046 26,136

Applicable Capital Charge for Concentration Risk 0.50% 0.50% 0.50%

Capital required for Concentration Risk SAR (‘000) 136.58 105.23 130.68

9.6. Capital Planning and Stress Tests

NOMW evaluates strategic options on the grounds of market attractiveness and growth

possibilities, along with the assessment of internal sources to exploit the opportunities, which

results in an informed decision backed by a business rationale.

Based on the evaluation of strategic options, NOMW will continue operating under the scope of

existing product/service licenses obtained from CMA, however will develop new products and

services to enhance client experience. The Company as a strategy envisages to expand its product

and service lines and it is expected that Investment banking and Asset Management for the coming

years will constitute major sources of revenue. With an expectation of high growth in operations,

NOMW will require continuous investment in working capital to support this growth.

As mentioned earlier, NOMW has sketched out a comprehensive business plan and has set out

key targets and milestones for its business lines to complement its growth.

Currently, the minimum capital requirement for NOMW as at December 31, 2019 is SAR 30.9

million (after Pillar II and stress scenarios) and the associated Capital Ratio was 1.61 times. This

ratio is well above minimum regulatory requirement of 1x and therefore NOMW does not curren tly

need to seek alternate sources of capital.

Stress Testing

Overview

Stress Testing refers to various techniques used by the APs to measure their vulnerability to

exceptional but plausible events. Stress testing is an important part of the risk management

process in NOMW and is considered as an integral part of ICAAP under Pillar II. NOMW has

already adopted CMA’s Prudential Rules, for guideline on stress testing and endeavors to improve

upon by adding further scenarios to the stress testing framework.


35

NOMW will apply stress tests at varying frequencies dictated by business requirements and

relevance. It will undertake fresh stress tests when there are significant modifications in the

underlying assumptions. The results of the various stress tests will be reported to the senior

management and Board of Director’s Audit Committee and will be an essential ingredient of

NOMW’s risk management systems.

The company will document the stress tests undertaken, the underlying assumptions, the results

and the corrective action to be undertaken.

Detailed Stress Testing

The technique for stress testing employed at NOMW is according to the size, nature & profile of the

company. The method is derived from guidelines provided by CMA and comparable industry

practice. The stress testing technique employed at NOMW consists of scenario analyses, which will

be carried out for the major risks that are faced by the company, viz., credit risk, market risk and

operational risk.

The results of stress tests are analyzed for net change in required capital. The impact is quantified

for the purpose of stress testing only where additional capital is required under a specific scenario.

Scenario 1 - Stress Testing of receivable deterioration

Stress Testing for receivable deterioration assess the impact of default by debtors of the company

resulting in a deterioration of receivable to past due receivables thereby affecting the capital

adequacy position. With respect to receivables deterioration Risk, the company has undertaken

stress testing of low, medium and high intensity decline to assess the impact on capital ratio.

The following scenarios have been assumed:

✓ Low: Impairment of 3% on the receivables collectability.

✓ Medium: Impairment of 5% on the receivables collectability.

✓ High: Impairment of 10% on the receivables collectability.

The results of the additional capital requirements are shown in the table below:

Summary (SAR) 2019

Low Medium High

Gross Account Receivables (000) 34,615 34,615 34,615

% of Impairment (Bad Debt) 3% 5% 10%

Amount of impairment cost 1,038 1,731 3,462

Capital Charge % 25% 25% 25%

Increase in Capital Charge SAR (‘000) (26) (43) (87)

Calculation from 2020 to 2022:

Following is the impact on capital in case bad debt were to increase in value by the percentages

given below


36

Summary

(SAR) 2020

Low Medium High



Amount of impairment cost 1,219 2,032 4,064



Summary

(SAR) 2021

Low Medium High



Amount of impairment cost 450 750 1,500



Summary

(SAR) 2022

Low Medium High



Amount of impairment cost 600 1,000 2,000



Scenario 2 – Stress Testing of increment in operational expenditure

Stress Tests for Operational Risk assess the impact of change in overhead expenses on the

company’s capital adequacy position. With respect to Operational Risk the company has

undertaken stress testing of low, medium and high intensity situations to assess the impact on

capital ratio.


✓ Low: Direct increase in expenditures by 5%

✓ Medium: Direct increase in expenditures by 10%

✓ High: Direct increase in expenditures by 20%


37

The results of the additional capital requirements are shown in the table below:

Summary Low Medium High

Total Expenses (000) 11,991 11,991 11,991

% Increase in Expenditures 5% 10% 20%

Amount of increased Expenditure 600 1,199 2,398


Increase in Capital Charge SAR (‘000) 220 440 880


Following are projected impacts on operational risk capital for Year 2020, in case expenditure was

to increase by 5%, 10% and 20% respectively:


Total Expenses (000) 20,425 20,425 20,425


Amount of increased Expenditure 1,021 2,043 4,085






Total Expenses (000) 22,627 22,627 22,627




Increase in Capital Charge SAR (‘000) 251 502 1,005




38


Total Expenses (000) 25,076 25,076 25,076




Increase in Capital Charge SAR (‘000) 278 557 1,113

Scenario 3: Stress Testing on Decline in TASI Level

Stress Tests for Market Risk on Equity Investments assess the impact of decline in the market

value of Equity Investments on the company’s capital adequacy position. With respect to Market

Risk on Equity Investments, the company has undertaken stress testing of low, medium and high

intensity decline to assess the impact on capital ratio. The company has based the scenario on all

the effected balances (Investment in equities, revenue from assets management and revenue

from custody service).


✓ Low: Decrease in Equity Investment prices by 5%

✓ Medium: Decrease in Equity Investment prices by 10%

✓ High: Decrease in Equity Investment prices by 15%

The results for 2019 are shown in the table below:

Summary

(SAR’000) 2019

Low Medium High

Total Investments in Equity 1,449 1,449 1,449

% Drop in Equity Prices 5% 10% 15%

Investments' impairment cost 72 145 217

Investments' Amounts after Decrease in Prices 1,376 1,304 1,231

Total effect on Capital Base 72 145 217



Following is the impact on capital in case TASI level were to decline in value by the percentages

given below


39

Summary

(SAR’000) 2020

Low Medium High







Summary (SAR’000) 2021

Low Medium High







Summary

(SAR’000) 2022

Low Medium High







Scenario 4: Stress Testing on fall in Value of Investment Funds

Stress Tests for Market Risk on Equity funds assess the impact of decline in the market value of

Equity Funds on the company’s capital adequacy position. With respect to Market Risk on Equity

funds, the company has undertaken stress testing of low, medium and high intensity decline to

assess the impact on capital ratio. The company has based the scenario on all the effected


40

balances (Investment in mutual fund, revenue from assets management and revenue from

custody service).


✓ Low: Decrease in mutual funds NAV by 5%

✓ Medium: Decrease in mutual funds NAV by 10%

✓ High: Decrease in mutual funds NAV by 15%

As of the year end of 2019 the Company does not hold any investment in investment funds neither

there are any plans of investment in the future.

The results are shown in the table below:


Low Medium High

Total Investments in Mutual Fund - - -

% Drop in Mutual Fund NAV 5% 10% 15%

Investments' impairment cost - - -

Investments' Amounts after Decrease in Prices - - -

Total effect on Capital Base - - -

Increase in Capital Charge SAR (‘000) - - -


Following is the impact on capital in case investment fund were to decline in value by the

percentages given below

Summary

(SAR’000) 2020

Low Medium High








41

Summary

(SAR’000) 2021

Low Medium High







Summary

(SAR’000) 2022

Low Medium High







Scenario 5: Stress Testing on fall in Value of Real Estate

Stress Tests for Market Risk on Real Estate assess the impact of decline in the market value of

Real Estate on the company’s capital adequacy position. With respect to Market Risk on Real

Estate, the company has undertaken stress testing of low, medium and high intensity decline to

assess the impact on capital ratio. The company has based the scenario on all the effected

balances (Investment in real estate funds, revenue from assets management and revenue from

custody service).


✓ Low: Decrease in Real Estate Investment value by 5%

✓ Medium: Decrease in Real Estate Investment value by 10%

✓ High: Decrease in Real Estate Investment value by 15%


42



Low Medium High

Total Investments in Real Estate fund 7,360 7,360 7,360

% Drop in Real Estate 5% 10% 15%

Investments' impairment cost 368 736 1,104


Reduction on Management Fees 844 1,688 2,532

Reduction on Custody Fees 80 160 240

Total effect on Capital Base 1,292 2,585 3,877



Following is the impact on capital in case real estate were to decline in value by the percentages

given below


Low Medium High



Investments' impairment cost 368 736 1,104


Reduction on Management Fees 981 1,962 2,943





Low Medium High



Investments' impairment cost 689 1,379 2,068


Reduction on Management Fees 1,025 2,050 3,075





43


Low Medium High



Investments' impairment cost 939 1,879 2,818


Reduction on Management Fees 1,145 2,290 3,435




Scenario 6: Stress Testing on Change on Interest Rate

Stress Tests for the change on interest rate assess the impact of decline in the interest rate on

the company’s capital adequacy position. With respect to the decline on interest rate, the

company has undertaken stress testing of low, medium and high intensity decline to assess the

impact on capital ratio.


✓ Low: Decline in Interest rate by 5%

✓ Medium: Decline in Interest rate by 7%

✓ High: Decline in Interest rate by 12%


Summary (SAR) 2019

Low Medium High

Total Other Income 175 175 175

% Reduction in other Income 5% 7% 12%

Amount of reduction in other income 9 12 21


Increase in Capital Charge SAR (‘000) 1.0 1.4 2.5


Following is the impact on capital in case interest rate were to decline in value by the percentages

given below:


44

Summary (SAR) 2020

Low Medium High





Increase in Capital Charge SAR (‘000) (0.8) (1) (2)

Summary (SAR) 2021

Low Medium High






Summary (SAR) 2022

Low Medium High

Total Other Income 1,250 1,250 1,250





The Company ensures that, at any point in time, the capital adequacy ratio is above the minimum

limit prescribed by the regulator. If the forecasted capital ratio after stress testing seems likely to fall

below the minimum limit, corrective action will be taken to reduce the balance sheet or increase

capital.

Based on the projection and the results of the stress tests it shows that the company holds

sufficient capital against plausible stress event and the Company has sufficient capital to support its

planned business activities in the coming 3 years and hence does not intend to raise more capital.

Please refer to the Executive Summary, were its demonstrated that the Company’s Capital

Coverage remain comfortably above the minimum regulatory levels even if severe stress events

transpire, taking into account the forecasted assets from the year 2020-2022.

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